2023 (11) TMI 1041 - AT - Income Tax

Assessee proves investor identity and capacity, section 68 additions deleted but business income addition restored

ITO, Ward-7 (2), New Delhi Versus M/s. Samarth Fincap Services Pvt. Ltd.

ITO, Ward-7 (2), New Delhi Versus M/s. Samarth Fincap Services Pvt. Ltd. - TMI Issues Involved:1. Deletion of addition of Rs. 2,40,00,000/- as unexplained cash credits.2. Deletion of addition of Rs. 35,00,000/- as unexplained unsecured loans.3. Restriction of estimated business income from Rs. 2,31,200/- to Rs. 1,00,000/-.Summary:Issue 1: Deletion of Addition of Rs. 2,40,00,000/- as Unexplained Cash CreditsThe Revenue contested the deletion of Rs. 2,40,00,000/- added by the AO as unexplained cash credits under Section 68 of the I.T. Act. The AO had accepted Rs. 1.30 crores as genuine but added the remaining Rs. 2.40 crores. The CIT(A) concluded that the assessee provided sufficient documentary evidence, including PAN, ITR, bank statements, and confirmations from investors, establishing the identity, capacity, and genuineness of the transactions. The AO failed to provide specific adverse findings or discrepancies. The CIT(A) relied on judicial precedents, including CIT v. Lovely Exports, and found no justification for the addition. The tribunal upheld the CIT(A)'s findings, dismissing the Revenue's ground.Issue 2: Deletion of Addition of Rs. 35,00,000/- as Unexplained Unsecured LoansThe Revenue challenged the deletion of Rs. 35,00,000/- added by the AO as unexplained unsecured loans. The assessee provided names, addresses, PAN, confirmations, and bank statements of the loan creditors. The CIT(A) noted that the AO did not bring any adverse information or specific reasons for the addition. The tribunal observed that a major part of Rs. 31 lakhs was repaid during the same financial period, supporting the genuineness of the transactions. The tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground.Issue 3: Restriction of Estimated Business Income from Rs. 2,31,200/- to Rs. 1,00,000/-The Revenue contested the CIT(A)'s decision to restrict the estimated business income to Rs. 1,00,000/-, which was below the returned income of Rs. 1,92,270/-. The AO had estimated the business income at Rs. 2,31,200/- based on a 10% net profit rate on the total turnover. The tribunal noted that reducing the returned income was not justified without valid reasons. The tribunal reversed the CIT(A)'s restriction and restored the AO's addition, allowing the Revenue's ground.Conclusion:The tribunal partly allowed the Revenue's appeal, upholding the deletion of additions related to unexplained cash credits and unsecured loans but restoring the AO's estimated business income.